On the other hand, Tesla may have significantly more room to the downside, if execution risks continue to crop up.
Merrill Lynch analyst John Lovallo, who has a $45 price target and "underweight" rating on shares, believes execution risk is the biggest problem facing Tesla's share price over the next several months.
"Battery fires, the ongoing NHTSA investigation, and speculation of a Model S recall have dominated recent news flow and added downward pressure to TSLA's stock," Lovallo wrote in his note. "While these concerns may be valid, we believe an ever more significant risk for shareholders lies in the fact that Tesla's current market value continues to imply loft and possibly unrealistic volume expectations."
He notes that Tesla would have to sell 348,000 cars by the year 2020 to achieve its current valuation. Currently, the company expects to sell around 21,000 Model S units this year. Musk has said in recent interviews that fourth-quarter shipments of the Model S are going better than expected. Tesla said in its third-quarter earnings report that it expects to ship around 6,000 Model S units.
--Written by Chris Ciaccia in New York
>Contact by Email.